Prediction markets, given enough active participation, are increasingly seen as an excellent way to arrive at the answers to any number of questions.

Posted on November 19, 2009 by Chris F. Masse

@ Singularity University:

“Indeed, the winning technology concept –a pill that could cure cancer– and team were accurately prognosticated by the [prediction] market.“

About Chris F. Masse

Founder and President of Midas Oracle
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6 Responses to Prediction markets, given enough active participation, are increasingly seen as an excellent way to arrive at the answers to any number of questions.

  1. Paul Hewitt says:
    November 19, 2009 at 9:08 AM

    Chris, are you jumping on the prediction market bandwagon (at long last)? I didn’t think so, but I’m curious as to why you would parrot such a naive perspective on prediction markets.

    Prediction markets are not “excellent” ways to answer “any number” of questions. Their prediction range is much more limited than the author states. Furthermore, using an “idea pageant” that was “accurate” to support the claim that prediction markets are an excellent way to forecast the future is quite a stretch.

    The problem with the example cited is that it is not a true prediction market. Yes, it uses the same mechanism, but it is not a prediction market. A PM attempts to predict an independently generated or occurring outcome. In this case, the market, itself, generated the outcome or someone decided which of the market selections was to receive “faux” venture capital support. Sounds a lot like the Olympic site selection PMs, which were completely wrong.

    I suspect that most of the EPM adoption cited by McKinsey (8%!) involves similar, “idea pageant” types of markets. I agree that these markets are a form, and a useful one at that, of collective intelligence, but they are not prediction markets and should not be used as proof that PMs work.

    Should we be expecting a Midas Oracle Conference on Prediction Markets in the near future? Of course I’m joking!

  2. Chris F. Masse says:
    November 19, 2009 at 10:04 AM

    Paul,

    I just linked to that story.

    Thanks for the analysis.

  6. Paul Hewitt says:
    November 24, 2009 at 6:44 PM

    Here’s an updated post on this topic on my blog:
    http://torontopm.wordpress.com/2009/11/24/idea-pageants-prediction-markets/

    It seems to me that the hype surrounding prediction markets is getting worse. Now there are numerous blogs all quoting the Chicago conference session about this idea pageant. All of the blogs are calling this the second coming of PMs (well, almost).

    Corporate decision-makers must continue to be very wary of these types of claims. Academics need to spend more time researching PMs than hyping them.

    I’ll have more to say soon.

    Paul

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